Post Magazine & Insurance Times 19 May 2011 Editions

Prepared by

Eleanor Mole Bid assistant, BLM London [email protected]

Post Magazine

News Greenwoods joins Telecoms fraud body UK hailed as whiplash capital of Europe Hebburn and Hiscox among winners at first ever Claims Awards Consumer insurance reforms will make it harder to turn down claims Mitsui steps up mid-market regional push RSA plans to 'dominate' marine after niche buy Solvency II to impact EU captive industry S&P downgrades Groupama IFS rating Allianz front-end fraud focus helps save £50m Zurich sees engineering business grow by 50% Aviva to attack motor with online-only brand Perseverance prepares to exit UK insurance market Simia run-off will have 'little effect' Hill Dickinson merges practices after strategic review Validus investigation unit spots £1m of fraud in first two months Crisis Survivor buyers undeterred by debts Restructure ends as 114 Axa jobs go Biba renews professional indemnity accredited broker panel

Feature articles News analysis – AJG acquisition: Deal or no deal After a number of stalled bids from a variety of firms, Heath Lambert has been bought by international giant Arthur J Gallagher. Post Magazine follows the timeline of the deal and looks at what the consequences may be.

Damage management – Surge: Surging ahead Recent surge events have shown insurers are getting better at coping with large numbers of claims but there is still room for improvement. Post Magazine finds out what could make a crucial difference the next time an extreme event occurs.

Schemes: Scheming for success Recent surge events have shown insurers are getting better at coping with large numbers of claims but there is still room for improvement. Post Magazine finds out what could make a crucial difference the next time an extreme event occurs.

Solvency II – Investments: Straight to the heart Solvency II is about much more than simple regulation and is already preoccupying chief investment officers. Ciara Searle examines the implications it will have for asset allocation and fund transparency.

1 Mentoring – risk managers: Passing the torch The process of mentoring, where experienced people give advice and encouragement to younger professionals, can be hugely beneficial and cost virtually nothing. Elaine Heyworth (Airmic board member and also on the board of European Professional Women’s Network) details a new scheme about to launch to assist up-and-coming risk managers.

Law reports An inflammatory judgment on findings of fire fraud Provoking an assault not contributory negligence Defendants alerted to ongoing liability

Insurance Times

Feature articles Interview: Steve Hardy 'You can kid yourself that you can be better at underwriting but that advantage only lasts so long’.

The Knowledge – professional risks: Market survey To test the temperature in professional lines, we ran a short survey among brokers. Responses were intriguing – and vocal, especially on capacity. Here’s what they said.

The Knowledge – professional risks: Hindsight What has the sector learnt from the Madoff scandal and the housing crash?

The Knowledge – professional risks: Horizon The issues facing the market.

The Knowledge – professional risks: Market Map Professional indemnity (PI) has been choppy since the recession hit. Markets have behaved erratically at times, yet premiums have stayed consistently low.

D&O market could face an uneven future In directors’ and officers’ (D&O), premiums have been soft for the best part of a decade and remain resolutely so.

The Knowledge – professional risks: The numbers Solicitors’ professional indemnity is the soap opera of the insurance world. The dramas and plot turns of the market belie its relatively small size; rarely a month goes by without one player leveling accusations at another.

The Knowledge – professional risks: The Buy Professional risks is broker dominated and likely to remain so. Although some insurers offer cover direct to SMEs online, specialist broking skills still drive the majority of business.

The Knowledge – professional risks: Steve Bonnington ‘Post-financial crisis, it is hard for professions to hide from negligent acts’

Greenwoods joins Telecoms fraud body

Defendant insurance law firm Greenwoods Solicitors has joined the Telecommunications UK Fraud Forum, a body for the exchange of information and the promotion of a united effort against telecommunications fraud.

Greenwoods is the first firm of solicitors to join TUFF and was sponsored by CPP, one of the largest mobile phone and credit card insurers in the UK.

Greenwoods has also recently completely redesigned and upgraded its specialist Intelligence database and expanded its Fraud Intelligence team based at its Milton Keynes office.

2 David Booker, head of intelligence services at Greenwoods said: “Greenwoods is determined to combat insurance fraud, not only from within the insurance industry and by working with our core clients and partners, but also by sharing cross industry data in real-time allowing us further insight into the activities and connections of would-be fraudsters.

“Combined with our existing memberships of the Insurance Fraud Investigation Group (IFIG) and the Credit Industry Fraud Avoidance System (CIFAS), we are able to acquire and share data more efficiently than ever before.

“In addition, by attracting, and training, exceptionally skilled staff together with the best available systems and processes, we are able to fully support the Counter Fraud Group (CFG) in defending fraudulent insurance claims”.

Karen Mann, head of CFG at Greenwoods added: "The acquisition of key intelligence and its use in defending suspected fraudulent claims in the current climate is paramount. We aim to provide our legal teams with the best ammunition available so they have the best chance of winning cases for our clients. We are now extremely well placed to better understand and interrogate key data sets in an effort to identify the key issues sooner and more cost effectively than ever before".

UK hailed as whiplash capital of Europe

The Association of British Insurers has today called for a clampdown on the UK’s "pain in the neck culture" that it says has made the UK the whiplash capital of Europe.

According to the trade body, one in every 140 people claim whiplash a year. It added the activities of ambulance chasing lawyers and claims management firms, coupled with ‘crash for cash' staged motor accidents has increased the risk of fraudulent claims.

Among the facts highlighted by the ABI are that nearly 1200 whiplash claims are made every day, and that this is six times more than the number of people who claim for workplace- related injury every year.

It also revealed the costs to the NHS of treating whiplash have been estimated at £8 m a year; three-quarters of personal injury claims in the UK are for whiplash, more than elsewhere in the Europe; and insurers pay out nearly £2bn a year in claims for whiplash.

Speaking at the 2011 Whiplash conference in Leeds today James Dalton, the ABI's assistant director of motor and liability, said: "Despite the statistics I doubt that that the UK has some of the weakest necks in Europe. Often difficult to diagnose, easy to fake and exaggerate whiplash is a fraudsters dream."

As a result of this the ABI is calling for action, including:

. Implementation of Government proposals for civil justice reform to ensure genuine claimants get fair compensation and access to rehabilitation more quickly, and to reduce the scope for fraudulent claims . Intensifying insurers' crackdown on fraudulent whiplash claims, for example cracking down on organised ‘crash for cash' staged motor accidents. . Raising consumer awareness on the need to keep a safe braking distance from the vehicle in front. So called ‘tailgating' is the main cause of whiplash . Developing authoritative medical guidance on how to accurately diagnose and treat genuine whiplash.

Mr Dalton added: "We seem ill-equipped to effectively identify and treat whiplash; our compensation system is too slow in paying fair compensation and offering rehabilitation to genuine claimants, and our compensation culture encourages fraud.

"All this must change. Our action plan will set up what is missing: an effective partnership between doctors, insurers and lawyers to ensure better prevention and treatment of whiplash,

3 and crackdown on fraudulent claims. This will reduce the unacceptable costs which whiplash currently imposes on individuals, businesses and the state."

Hebburn and Hiscox among winners at first ever Claims Awards

Roy Hebburn, divisional claims manager (technical) at Allianz was handed the inaugural achievement award at last night’s Claims Awards ceremony.

Mr Hebburn was one of eight winners at the event, which ran as part of the annual Claims Club dinner at the Grand Connaught Rooms in Covent Garden, London.

Introducing the night, Claims Club chair Jonathan Swift said: "As you will all be aware The Post Claims Club has been championing and supporting the UK general insurance claims sector since 2003 with its quarterly meetings and annual conference, alongside this highly anticipated and prestigious event.

"This all adds up to a thorough and far reaching program, but this year it was decided that in order to up the ante in terms of the Club's ongoing mission, we should reward those that have made a difference in the last year.

"As such the Claims Awards were born, and later on this evening after dinner we will hand out eight prizes in respect of the innovation, the good practice and the great work that you all - as claims professionals - have been doing against an ever testing background of social and political upheaval."

The winners in full Customer Care – Ageas Training – Aviva Innovation of the Year – LV Personal Lines Team – Hiscox Commercial Lines Team of the Year – Hiscox Rising Star - Personal Lines - Robin Stagg of Allianz Rising Star - Commercial Lines - Kelly Potter of QBE Achievement prize - Roy Hebburn of Allianz

Consumer insurance reforms will make it harder to turn down claims

The first changes to consumer insurance legislation in more than a century will prevent insurers from "hiding behind" unrelated errors to avoid paying claims.

Mark Hoban, Financial Secretary to the Treasury, announced on Tuesday that the government plans to take forward the proposed reforms from the Consumer Insurance (Disclosure and Representations) Bill.

The reforms, based on recommendations made by the Law Commission and Scottish Law Commission in their 2009 report, Consumer Insurance Law: Pre-Contract Disclosure and Misrepresentation, potentially make it harder for insurers to turn down claims as the onus of responsibility to provide relevant information shifts to them from the customer.

Responding to the announcement, Jonathan Evans, MP for Cardiff North and chairman of the All Party Parliamentary Group on Insurance & Financial Services, told Post: "Under the existing law, unless the consumer has answered everything absolutely correctly on the proposal form, the law enables an insurance company to avoid its liabilities.

"Most reputable companies ought not to take advantage of this archaic law, but that is not the point. The law ought to change to reflect the fact that we have clear rules in relation to disclosure and that people shouldn't be asked things that make no difference as to whether or not they should be accepted as a risk. If a customer has been asked questions in good faith, one ought not to hide behind some error that has been made if it wouldn't have affected the risk taken on by the company."

4 Mr Evans said that at an APPG meeting in December, the Law Commission indicated its only concern had been potential opposition to the legislation from the Association of British Insurers. However, he said clarification of the ABI's position moved the Bill forward.

He added: "The APPG is delighted that Mark Hoban is taking this forward and we will be seeking to make sure that he does so at the earliest available opportunity."

A statement from the Treasury said the Bill will provide protection for consumers and reduce costs for the industry. It is subject to minor modifications to meet concerns raised during the consultation.

David Hertzell, the law commissioner leading the project at the Law Commission for England & Wales, said: "This is the first time that consumer groups and the insurance industry have reached a consensus on the issue of pre-contract disclosure. It is a notable achievement that will improve consumer protection, while also enhancing the reputation of the insurance industry."

An ABI spokesman added: "We are pleased the Law Commission recognises that best practice throughout the industry, supplemented by FSA regulation and the approach of the Financial Ombudsman Service, already protects the consumer. The Commissions' proposals give legal status to existing best practices, and brings them together in one place in a clear format."

Insurers react to reforms to disclosure rules Tom Woolgrove, pictured below right, managing director of personal lines at Royal Bank of Scotland Insurance, said the Bill will "build confidence and trust between insurance companies and customers". He added: "We find most policyholders give the correct and full information when they set up a policy with us. However, in about 2% of our claims, we discover something that should have been disclosed earlier, such as convictions, prior claims or modifications. This bill should reduce any arbitrary or subjective repudiations based on unintentional non-disclosure, which damage our industry's reputation."

Gareth McChesney, Allianz Retail head of home and motor portfolio management, added: "Allianz fully supports this reform, which will create greater transparency for our customers and ensure they are treated fairly. As a responsible insurer we are committed to ensuring that customers understand their rights and obligations, and have their genuine claims paid quickly."

Mitsui steps up mid-market regional push

Mitsui Sumitomo is poised to open its doors in Birmingham as part of its regional mid-market push, ahead of the unveiling of its new property-led product for this target segment in quarter four. The news follows last month's four-strong recruitment in Ireland in its bid to deploy underwriting expertise on the ground in regional markets across the UK and Ireland.

Jeremy Stevenson, marketing & development director at Mitsui Sumitomo, told Post offers are currently with two underwriters the insurer is hoping will launch its Birmingham branch. He said Mitsui will now spend "eight to nine months" securing 20 to 30 "exceptionally good" regional brokers to form long-term partnerships. The target premium range is £15 000 to £150 000.

Former Chubb Europe personal lines manager John Sims was hired last September as a consultant to undertake research ahead of the product launch. He told Post: "We are taking our time to find brokers that really get what Mitsui Sumitomo is all about. The product will have very wide coverage and be warranty and average-free, so if we don't pick the right brokers that would be bad. There is no pressure from Andrew [McKee, CEO] on gross written premium that brokers would be required to write; the selection will be attitudinal."

Chris Bottomley, property underwriting manager, added the product will be "bottom-line led" with a draft risk appetite already in place in terms of the tranche of sectors Mitsui wants to write, "which will be refined before launch".

5 Mitsui's existing channel comprises all Lloyd's brokers, with most of its income coming from the top 10 of these.

RSA plans to 'dominate' marine after niche buy

RSA's acquisition of niche marine broker Noble Marine is part of a plan to dominate the UK marine market, according to marine director Richard Turner.

The insurer has acquired the Nottinghamshire broker Noble Marine, as revealed by Post Online, after reaching a formal agreement to purchase all shares in Noble Marine Insurance Brokers and sister company Noble Marine Underwriting Agency.

Mr Turner told Post the deal will see RSA write a "major proportion" of Noble Marine business and will retain its brand: "For the first time, it gives us a brand that is working in the marine market. Noble Marine will become a part of our sales strategy."

The broker's 12 staff deal with policies and claims in-house, covering classes of business such as dinghy, windsurfer, RIB, speedboat, narrowboat, rowing boat and jet ski insurance. It was formed in 1971 by Richard Langford and Tony Noble, who will retire from the business. Jonathan Langford, son of the co-founder, has assumed the role of managing director.

Post understands the deal will act as a catalyst for further growth in the East Midlands.

Mr Turner told Post: "This acquisition is not an investment in isolation. We see ourselves as the leading marine broker in the UK, and over the past five years we have established marine operations in Rotterdam, Cologne, Paris, Madrid and Antwerp. We are putting investment into this unit, and will release branded RSA marine products throughout this year and 2012."

Mr Turner refused to rule out further acquisitions in the marine market.

RSA Group's marine book grew by 12% to £75m in 2010.

RSA UK chief executive Adrian Brown told Post the close timing of its acquisitions of Oak Underwriting and Noble Marine was coincidental, adding: "Andy [Haste, group CEO] encourages us to have an active deal pipeline across the group. If something is up for sale — or even if it isn't — RSA will look at it."

He added that while he hoped RSA completes more UK deals this year, "there is nothing in the immediate pipeline".

RSA to reinvigorate global broker relationships with Donaldson appointment

RSA intends to place greater weight on developing its relationships with global brokers through the appointment of Paul Donaldson, pictured below right, as group broker relationship and sales director.

Mr Donaldson, currently managing director of the UK commercial lines division, takes up his new role in the summer, reporting to group CEO Andy Haste, when he will also join the group executive board and become chairman of the newly created group risk solutions and specialty board.

He will be succeeded by RSA's emerging markets CEO Jon Hancock, who was selected as the "standout candidate" from a list of up to eight internal candidates, according to UK CEO Adrian Brown.

Since last year, Mr Brown has been responsible for RSA's relationship with Willis at a senior global level while international CEO Simon Lee has been responsible for those with Aon and Marsh.

"A number of global brokers have developed dedicated teams working across the globe. We have been managing those relationships as an adjunct to our jobs," said Mr Brown. "A lot of major brokers talk of rationalising the number of carriers they work with and we want to make 6 sure we are well positioned to win business as that occurs by having someone focused on that around Andy's table."

Approximately 17% of RSA's overall UK business — or 27% of its commercial UK business — currently comes through the global brokers, Mr Brown said.

Solvency II to impact EU captive industry

The looming implementation of Solvency II will change the market environment dramatically for captive insurers according to recent research.

The report by AM Best found as parent organisations take a fresh look at captives' role in light of increased regulatory requirements under the new regime, the market is likely to change.

Regulatory capital requirements appear certain to increase dramatically-as much as three-to fourfold for European Union domiciled captives.

Most captives operate with multiples of the current regulatory capital requirements, but AM Best believes many owners will have to commit more capital to their captives under Solvency II.

Pillars II and III of the new regime will tighten standards for enterprise risk management, processes and reporting, leading to higher operating costs.

Captives writing business inside the EU but domiciled elsewhere will find their fates tied to the achievement and application of regulatory equivalence with the new EU system.

Since many captives operate as reinsurers, equivalence could be a key consideration, as some reinsurance business is already supported by collateral or deposits of reserves with a fronting company.

Captive centres clearly have a difficult balance to strike between obtaining equivalence and remaining attractive to captives; decisive factors are likely to be how proportionality is implemented within the EU and the impact of collateral posting on captives.

It is unclear whether proportionality-simplification provisions designed for smaller insurers-will apply to the captive sector, and each captive likely will be viewed on its own merits, given that proportionality under Solvency II is more about risk profile than size.

AM Best, therefore, believes captives should prepare for a worst case scenario to minimise the impact of Solvency II - no grant of proportionality-and try to mitigate the new regime's effects.

Key steps would be participation in the European Insurance and Occupational Pensions Authority's quantitative impact studies and the parallel development of partial capital models that best reflect each captive's risks.

However, the ratings agency believed captives able to obtain a secure financial strength rating should not have major difficulties adapting to Solvency II; strong risk-based capital, robust risk management and governance, close integration with a securely rated parent and effective reporting systems will leave captives well positioned to satisfy the demands of the new regime.

S&P downgrades Groupama IFS rating

The insurer financial strength rating of Groupama has been downgraded from ‘A-‘ to ‘BBB+’ by Standard & Poor’s because of its “material exposure to Greek government bonds”.

The outlook for the France-based composite insurer is negative.

7 According to S&P, the downgrade reflects the rating agency's view that the rating action on the Greek sovereign will weaken Groupama's creditworthiness because of its material exposure to Greek government bonds.

In a statement, the ratings agency said: "We lowered the sovereign rating by one rating category, to the 'B' from the 'BB' rating category on May 9, 2011. According to our risk-based insurance capital model, this will significantly increase capital requirements for credit risks and in turn further weaken Groupama's capital adequacy. We therefore believe it is unlikely that Groupama's capital adequacy under our model will recover to the levels supportive of strong financial strength ratings in the next two years."

It continued: "In addition, we said in our rating action on Greece published on May 9, 2011, that our projections suggest that principal reductions of 50% or more could eventually be required to restore Greece's government debt burden to a sustainable level. We acknowledge that Groupama's use of the profit-loss sharing mechanism with policyholders could effectively mitigate life insurers' realised investment losses. However, we do not think these potential loss transfers to policyholders would be easily achievable, and therefore see a potential negative impact on the insurer's earnings.

"The negative outlook reflects continuing uncertainties we perceive about Groupama's magnitude and speed of improvement in operating performance and capital adequacy over the next two years."

Allianz front-end fraud focus helps save £50m

Allianz Insurance is on track to identify £50m of insurance fraud in 2011, according to UK chief executive Andrew Torrance — boosted by work undertaken by the insurer in private car application fraud.

"Trading over the web has encouraged people to actively look to try and manipulate their details to produce a lower quotation," he said, following publication of the insurer's first quarter results.

"We have the systems in place to detect when people are doing that and hopefully the market as a whole will do more to tackle it over the next 12 months. One of the reasons the performance of the private car market has been so poor is that insurers haven't been getting the premium for the exposures that are there in the market."

Mr Torrance added that, in the first quarter of the year, Allianz saved more on front-end private car underwriting fraud than in the whole of 2010.

Mr Torrance attributed the drop in operating profit of 6% to £34.4m (Q1 2010: £36.7m) to lower investment returns, which, he said, show little sign of recovery.

"We coined the phrase 'the new normal' and I think this is the new normal that we have to deal with," he said. "It puts much more emphasis on making the profit from underwriting rather than relying on investment income and that is certainly what we are looking to do. But, in this quarter, we haven't been able to build the underwriting profit to compensate the reduction in investment income." The results showed gross written premium up 7.8% to £443.5m (Q1 2010: £411.3m)and a combined ratio of 96.9% (Q1 2010: 96.5%)

Mr Torrance concluded: "We are only six weeks beyond the first quarter, but as long as there is not an onset of weather catastrophes in the balance of the year, I think the business is very well set for another year of strong performance."

Allianz targets provincial brokers and moots mobile underwriting roll-out Allianz Commercial has set its sights on doubling the proportion of revenue generated by provincial brokers, alongside the likely roll-out of its mobile underwriter initiative currently being piloted in the South West. Simon McGinn, director of commercial broker markets, told Post that Allianz still considers itself a "poor relation to other players" in this market and it is "time to take our proposition to a broader audience". The push will centre on brokers with 8 turnover between £3m and £8m, a group which currently represents less than 10% of Allianz Commercial's revenue base, with Mr McGinn stating: "We hope to double that over the next couple of years."

It will seek to replicate the 'best practice' developed by Allianz Commercial's Scottish team over the past 12 months, which has "made great strides" in increasing penetration among smaller brokers in the region, he said. "This time last year, new business from that channel represented 10% to 20% in Scotland. This year, that figure has risen to 50% to 60%. By any measure, that is a pretty dramatic increase and has not been at the expense of relationships with other brokers."

Mr McGinn also revealed that Scotland — as well as East Anglia — tops the list of potential regions to roll-out its mobile underwriter initiative, with the six-month review of the South West pilot set for July.

Zurich sees engineering business grow by 50%

Zurich's engineering insurance business has grown by 50% to £15m gross written premium in the past two years, with the ambition to take it to £25m over the next three to five years.

The income boost has followed the decision to bring engineering insurance back alongside its fee-based engineering inspections work, which generates £50m and claims to be the UK's number one.

Dave Smith, managing director of commercial insurance, told Post he was reluctant to set a tighter timeframe for this secondary growth phase, stressing that further expansion had to be "sustainable" and "expert-led".

He compared the growth projections and strategy to that of Zurich's real estate business, which started as a £50m account "and, seven years later, is worth £250m".

Mr Smith moved the two engineering businesses back together at the "first chance I got" after he became MD. The specialist division came on board 12 years ago via the acquisition of Eagle Star.

"The initial idea was to get more traction from offering a standalone fee-based business but then, when clients did want to talk about insurance issues at the same time, we would lose out," he explained.

Aviva to attack motor with online-only brand

Aviva is gearing up to challenge multi-brand motor insurance giants Royal Bank of Scotland Insurance and Admiral on the aggregators with the launch of a new internet-only brand.

The insurer is set to extend its online presence through its new UK-based brand, due to launch in the summer, which will focus on motor with the potential to be expanded into other lines in the future.

Mark Hodges, Aviva UK chief executive, told Post: "We took Aviva off the aggregators a couple of years ago, which was right for that brand and we don't want it back there now.

"We are competing in the market with multi-brand companies such as Admiral and RBSI and, at the moment, we are using Aviva and RAC, but this is about opening up additional routes to market."

He added: "We have to make the economics of being on aggregators work and, with our pricing expertise in place, we can achieve that."

Mr Hodges said the low-cost, purely web-based proposition will target the full range of customers that it currently services, adding it will be motor-focused for "quite some time" before new lines are explored. Since the insurer withdrew its previous internet-only brand Simple Cover it retains an aggregator presence through RAC, which is expected to be sold. 9 However, Mr Hodges would not comment on the sale's progress, adding: "We do not comment on market speculation."

Aviva's UK general insurance net written premium increase for a fifth consecutive quarter was up 20% year-on-year to £1.1bn (Q1 2010: £913m), while its combined operating ratio improved to 98% (Q1 2010: 104%), compared to a group GI COR of 97%.

It described motor as the "key highlight", with customer numbers reaching two million, bought direct, through brokers or through the RAC panel. It added that rolling out direct pricing to brokers contributed to an increase in net written premiums of 60% compared to Q1 2010 and 180 000 new broker customers since the start of 2010.

Rates increased over the past year by 24% in personal motor, 6% in homeowner and 10% in commercial motor. However, Mr Hodges said despite some signs of improvement to soft conditions in commercial lines, it is too early to determine whether this will develop into a long-term trend.

Aviva expands portfolio Aviva has expanded its portfolio of bancassurance partnerships after extending its general insurance tie-up with HSBC in the UK by becoming a preferred strategic partner across all of Europe.

The arrangement has the potential to develop new opportunities across the life and GI sectors throughout Europe.

The HSBC and Aviva five-year exclusive general insurance distribution deal signed in 2007 for home, travel and creditor business in the UK is now extended to 2016. Mr Hodges told Post: "This is great news for Aviva group because having preferred status across the UK and Europe opens up the possibility to do a lot more with HSBC. It is a really good sign of the strategy I have laid out around the composite model and where I want to take the UK business.

"Conversations are ongoing with HSBC about where we want to exploit opportunities but it's too early to talk about that."

Perseverance prepares to exit UK insurance market

Perseverance, the Gibraltar-based former owner of KGM, is set to dispose of one of its remaining assets in the UK insurance market, Post understands, following negotiations to sell its stake in One Answer Network.

The firm's UK subsidiary, Optimas Insurance Group, owns a 39% stake in the personal lines network, which it acquired in October 2008, four months after the acquisition of its majority stake in KGM.

Optimas' interests also include a 100% stake in niche motor broker Premium Choice.

KGM, a niche motor insurer that operates Syndicate 260, was sold to Canopius in July 2010, amid declining profits and deterioration in the personal lines motor market.

At the time, a market source close to the business said: "Perseverance has become fed up — and will either withdraw its capital or sell the business."

According to its 2009 results filed at Companies House, Optimas posted a combined operating ratio of 141.1%, a claims ratio of 115.3%, and losses of £13.42m.

In the filings, Optimas reveals it has received a £6.8m loan from another subsidiary business in the Perseverance group — Coriander Limited — payable from January 2011.

The group was unavailable to comment on whether Premium Choice is also set to be sold. However, Post understands that it is also keen to exit this relationship.

10 One Answer Network and Premium Choice were also unavailable for comment.

Simia run-off will have 'little effect'

The Solicitors Regulatory Authority has downplayed the effect of the Solicitors' Indemnity Mutual Insurance Association's decision to go into run-off.

The mutual, which was set up in 1986 to reduce insurance costs and prevent under-capacity in the market, was established by 38 solicitors firms. As of 16 April 2011, 155 firms were part of the mutual.

Simia helped meet professional indemnity requirements above the £1m mark — not insuring the first £1m — for firms of solicitors based in England and Wales.

The announcement follows a meeting on 24 March, where Simia members voted to place the business into run-off.

In a letter to members, Simia said: "Ultimately, Simia will be removed from the FSA Register, liquidated and dissolved. As Simia is a mutual, in the event of there being a surplus, the surplus will be distributed to members in accordance with the provisions of the articles of association.

"Having now ratified the board's decision that Simia should cease accepting new business and be placed into run-off a number of consequences flow from that decision."

As a result, members whose PI policies end this month will not be able to renew their policies with Simia.

Simia added it would be "difficult to predict" how long it will take to deal with liabilities given the length of time it takes for claims to develop. Consideration will be given by the board to the possibility of purchasing additional reinsurance protection in order to minimise the risk of future claims, it added.

The SRA told Post that the decision is unlikely to have a material impact on the wider insurer or solicitor markets: "Simia is a mutual and so it can decide when to leave the market. It is, in a way, a one-off, a specialist insurer if you like, as it does not provide cover for the first £1m. It wasn't really a big player and we don't see its closure having any real adverse effects on the market."

The development follows the SRA's decision to replace the assigned risks pool in 2013 with a system where insurers offer a three-month extended policy period.

Simia was unavailable for comment.

Hill Dickinson merges practices after strategic review

Hill Dickinson has merged its insurance and professional risk practices following a strategic review of the business. As a result of the changes, Ruth Lawrence, who joined the Liverpool- headquartered firm 20 years ago as a solicitor, assumes the role of business group leader for the newly merged unit.

Her remit will include responsibilities for offices in London, Manchester, Sheffield and Chester as well as Singapore and Piraeus, Greece.

Seven practice groups have been consolidated into four business units: insurance, business services, health and marine.

Ms Lawrence said: "The amalgamation of practice groups provides us with a great opportunity to develop a top-level insurance offering out of our London office, while at the same time providing a nationwide, cost-effective service from our regional offices to meet all insurers' needs in a challenging market. There is strong growth in the insurance sector and we have seen a significant increase in turnover in all our core areas." 11 She insisted that the merging of practices will "enable us to provide a consistent service across the field to meet all insurer requirements. It will streamline our offer and make it simpler for clients to access a wider range of legal services to support their business".

Hill Dickinson managing partner Peter Jackson, added: "Ruth has many years of experience, not just in the insurance industry but as an integral part of the Hill Dickinson team for more than two decades. We know she will use that experience to continue to develop the business profitably and meet clients' needs."

Validus investigation unit spots £1m of fraud in first two months

A new claims investigation unit set up by Validus has found nearly £1m of suspicious motor claims for insurance clients in its first two months of operation.

Since it began work in March, the team has investigated hundreds of potentially suspicious claims, according to Validus chief operating officer Ed van Rooyen.

"Although it's very early days for the Validus CIU, we are amazed with the scale of suspicious activity and claims exaggeration we've uncovered," he said. "There are a number of scams being used to inflate claims, most of which are being picked up by our patented technology during the claims management process. These scams range from simultaneous or overlapping hires where a credit hire vehicle is in two or more places at once over many days, through to pure phantom claims."

Mr van Rooyen said one of the unit's biggest single suspect credit hire claims — worth nearly £30 000 — emerged after the team identified three credit hire claims that had been presented by the same individual posing as a company director.

"This was a good example where all three claims were submitted in different company names but risk indicators triggered an investigation," he said. "Our software identified that the same hire vehicle appeared on all three claims simultaneously. We established that one company did not exist and the two others had ceased trading prior to submission of the invoices."

The team consists of two people who work closely with the analysis division as part of the core business of settling credit hire claims, while Validus works with more than 20 clients including "four of the largest five" insurers and big fleet operators.

Mr van Rooyen added: "Our technology gives clients a new opportunity to spot potential frauds that might otherwise have escaped them."

Crisis Survivor buyers undeterred by debts

A broker has shown interest in failed risk management specialist, Crisis Survivor, as creditors reveal the business owes £300 000.

Last week, Post revealed that Crisis Survivor had entered liquidation four years after its launch blaming an immature market.

Post has learnt that several software houses in the business continuity space looking to build a consultancy arm, as well as an insurance broker that is considering building a larger risk management offering, have expressed interest in buying the company.

The deal is expected to be completed "within a matter of weeks" with the Crisis Survivor business model re-emerging in a different form.

Crisis Survivor left behind 38 creditors and debts of £312 599, however Post understands that a large part of that sum is shareholder investment.

Vaughan Andrewartha, director of one of the creditors, Votive Communications, said: "It beggars belief that a group of so-called crisis survival experts were unable to comprehend that having amassed debts of more than £300 000 in four years didn't constitute a crisis. I 12 personally would be extremely surprised if we see any of the directors involved in any element of crisis management in the future, as their handling of their own business shows they are woefully lacking at identifying business critical issues."

Restructure ends as 114 Axa jobs go

Axa Commercial chief executive Amanda Blanc has revealed the restructure of the firm is "complete", including the identification of 114 senior management staff who will leave the business. As a result of the swift changes, Axa branches across the UK are to relaunch to brokers on 1 June.

Post Online revealed the senior management cuts in April, as Ms Blanc moved to make sweeping cuts across the business.

The 114 staff are "now leaving or know they are leaving", she told Post. Ms Blanc, who had previously set a target of six months to restructure the business, said her first major task at the business was now complete: "All staff have been told, all appointments have been made, and in every location we have identified the people we want. We will be relaunching to brokers in June and have done this restructure in record time."

The insurer recently confirmed its intention to open more regional branches across the UK, with Newcastle and Cardiff identified as two potential areas. Ms Blanc said any plans would be put in place by the end of 2011.

Biba 2011: Biba renews professional indemnity accredited broker panel

The British Insurance Brokers' Association has renewed its professional indemnity accredited broker panel. Biba's three accredited brokers — Lockton Companies, Howden Insurance Brokers and Towergate Professional Indemnity — will continue to provide cover for members at what the trade body described as a "competitive" rate.

Graeme Trudgill, head of corporate affairs at Biba, said: "The award winning Biba professional indemnity initiative and our panel of accredited brokers are hugely popular with the membership. It has been developed to give Biba members access to the highest possible standards of cover and service.

"Lockton, Howden and Towergate have all proved that they share these standards and their policy wordings meet our strict requirements, so we are delighted to continue with such a strong panel."

Biba stressed each accredited broker had been selected for its proven knowledge of professional indemnity insurance and the markets available. The brokers represent both London and regional interests and, between them, a wide range of insurers that represent a cross-section of the market, it added.

An inflammatory judgment on findings of fire fraud

Yeganeh v Zurich Plc and Zurich Insurance Co (Court of Appeal — 11 April 2011)

The claimant, Mr Yeganeh, was a property developer with an extensive portfolio. One of his properties, chosen for residence, was subject to a fire in 2007. Mr Yeganeh made a claim against his insurer, Zurich, for damage to the property and loss of household contents. The claim included designer clothing to the value of £12 456. A friend of Mr Yeganeh provided evidence of the purchase of the clothing and of where it was kept.

Zurich alleged that the fire was intentionally caused, therefore voiding the policy, and the claim for clothing fabricated. As such, it refused to indemnify. Zurich based its arguments on the evidence of forensic investigators, Burgoynes, who could find no trace of the clothing. 13 Although the claimant's expert subsequently found evidence of burnt clothing, Zurich contended at trial that this was fabricated and placed in the house after the fire and subsequent to the inspection by the defendant's expert.

Judge Mackie QC ruled that the fire was not intentionally started and that Zurich should reinstate the building. However, it was also ruled that Mr Yeganeh's contents claim was fraudulent. Mr Yeganeh appealed against the second part of the ruling.

Lord Justice Ward allowed the appeal and remitted the case to the High Court for rehearing the dishonest claim for loss of clothing for two main reasons. First, the trial judge had failed to deal with the evidence given by Mr Yeganeh's friend; most notably the judge had not made, "the crucial finding of fact as to whether he found her to be equally dishonest."

Second, the judge failed to investigate the allegation that the fire damaged clothes had been planted. This theory should have been properly investigated and experts' views canvassed rather than simply being accepted.

Comment Where fraud or dishonesty is alleged, all material evidence concerned with the party's fraudulent or dishonest actions must be considered and addressed by the court, before a finding of fraud can be properly made. Elizabeth Whittingham, BLM London

Provoking an assault not contributory negligence

Co-operative Group (CWS) v Pritchard (Court of Appeal — 25 March 2011)

The claimant, Ms Pritchard, was employed in the Co-operative Group store in Hanham, Bristol. On 11 October 2003, after two weeks' sickness absence, she telephoned the store manager, Mr Wilkinson, requesting to take that day as holiday. He refused, so Ms Pritchard went to the store, along with her sister and niece, to remonstrate with him.

Inside the store she shouted and swore, causing a scene. Mr Wilkinson asked her to leave the premises, but she refused. He took hold of Ms Pritchard's arms, holding them in front of her, whereupon her sister grabbed him. A struggle ensued, during which Ms Pritchard bit Mr Wilkinson, and stumbled on a step, hurting herself.

Ms Pritchard sued the Co-op claiming the assault led to her psychiatric breakdown, depression and agoraphobia, preventing her from working. At first instance the judge decided in Ms Pritchard's favour. He said there was a "degree of provocation" by Ms Pritchard, but that it was not open to him to make a finding of contributory negligence. He awarded damages totalling £142 760.

On appeal, the main issue was whether the law barred defendants in actions for assault and battery from raising the defence of contributory negligence. By a 2:1 majority the Court of Appeal held that such a defence is barred.

The purpose of the Law Reform (Contributory Negligence) Act 1945 was to prevent claimants from being denied a remedy due to their own fault. Assault is an intentional tort, and the fault of the claimant is not a defence when injury is intended by the defendant.

However, an appeal on quantum was allowed. The trial judge had departed without good reason from the findings of the expert whose evidence he preferred. This concerned the effect of Ms Pritchard's pre-existing condition: stretching back to her childhood, this included a history of depression, anxiety and panic attacks.

Comment This case clarifies a thicket of conflicting authorities on the central issue of contributory negligence. Whether it has done so sensibly is, however, open to doubt. It seems unsatisfactory that provocation is a mitigating factor for assaults in criminal law, but not in civil

14 actions. Future cases of even more blatant provocation may lead to significant injustice. Matthew Ford, BLM London

Defendants alerted to ongoing liability

Dalling v R J Heale & Co (Court of Appeal — 5 April 2011)

In 2005, Mr Dalling fell from a height of approximately 15 feet while at work, suffering a severe head injury and fracturing a vertebra in his back. A remarkable recovery was made. However, as a result of the accident, Mr Dalling's mood changed causing some loss of emotional control along with problems of excessive drinking which were not present prior to the accident.

Furthermore, a second incident occurred in October 2008 in which Mr Dalling suffered a further head injury after a period of excessive drinking in which he fell backwards and hit his head.

The judge in the first instance had to decide on two separate issues. The first was whether Mr Dalling's first accident had contributed causally to his injuries in 2008. If so, the second issue was to what extent should Mr Dalling be held liable for his injuries.

The judge found that, based on the medical evidence, there was a strong balance of probabilities that the associated difficulties of the first accident played a causative part of the excess drinking in October 2008 and found Mr Dalling should bear one third of the responsibility for the incident.

The defendant appealed contending that the second incident had not been caused at all by them, as Mr Dalling had shown he could control his drinking — demonstrating this when his partner had threatened to leave him.

Counsel, therefore, argued that the finding of contributory negligence at one third was wrong.

The Court of Appeal found the first instance judge was correct in his finding that the drinking had not been a free and voluntary act on the part of Mr Dalling and it was fair to hold the tortfeasor liable, dismissing the appeal accordingly.

Comment This case upholds the two-stage test laid down in the judgment of the 2002 case of Kuwait Airways Corporation v Iraqi Airways Co, in which the court explores "whether the wrongful conduct casually contributed to the loss and if it did, what is the extent of the loss for which the defendant ought to be held liable" It should put potential defendants on alert that they may be liable for the ongoing consequences of an accident, where it causes the individual to take a course of action they previously would not have. Stephanie Castell, BLM Southampton

15 If you have any further questions on the content, please contact the editor(s).

Disclaimer

You have been sent this material because you have previously registered your interest in receiving information from Berrymans Lace Mawer LLP. If you no longer wish to receive the mailing, please unsubscribe.

This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of Berrymans Lace Mawer. Specialist legal advice should always be sought in any particular case.

BLM triggers is produced by the media relations team of Berrymans Lace Mawer (Salisbury House, London Wall, London EC2M 5QN) on behalf of Berrymans Lace Mawer LLP.

© Berrymans Lace Mawer LLP 2011.

Solicitors with offices in Birmingham, Bristol, Cardiff, Leeds, Liverpool, London, Manchester, Southampton and Stockton-on-Tees. Berrymans Lace Mawer is a trading name of Berrymans Lace Mawer LLP, a limited liability partnership registered in England under number OC340981, which is regulated by the Solicitors Regulation Authority and accredited to quality standards ISO 9001 and Lexcel. The registered office is at King’s House, 42 King Street West, Manchester M3 2NU where a list of members is available for inspection.

Information is correct at the time of release.

Birmingham Bristol Cardiff T 0121 643 8777 T 0117 975 8649 T 02920 447 667 F 0121 643 4909 F 0117 905 8810 F 02920 489 041

Leeds Liverpool London T 0113 236 2002 T 0151 236 2002 T 020 7638 2811 F 0113 244 2002 F 0151 236 2585 F 020 7920 0361

Manchester Southampton Stockton-on-Tees T 0161 236 2002 T 023 8023 6464 T 01642 661630 F 0161 832 7956 F 023 8023 6117 F 01642 661631

D:\DOCS\2018-01-01\0F9F8534A72C4488CBEF675D4FD96F53.DOC

16